Monday, January 08, 2007

Health Care: Start with Facts, not Fallacies

Zlotocha over at In Effect has been running a small forum on health-care. It's interesting.

But I think he has some problems with his argumentation that need remedial care. (heh heh)

The assumption in the article was that medical bills were going unpaid because people in HDHPs didn't have the money to pay their high deductibles. While this is true, it masks another story lurking beneath.

That's his first problem. Zlotocha & Co. are arguing (in effect) that MD's and hospitals should be insured against business losses. Really? That was the original purpose behind Blue Cross and Blue Shield. But nobody claims that all Americans were covered by the Blues, do they?

Further, it may be true that HDHP subscribers don't have the moola to pay off medical bills. But there are reasons which may NOT involve the terms of the coverage--such as other payment obligations which may be out-sized--e.g., housing, cars, heat, gasoline, food...

Next argument:

In its new study, the health industry group Vimo found that while over 3 million people are enrolled in HDHPs, only 820,000 have bothered to open a HSA. What's more, while the average HDHP deductible is $2,378 for single coverage and $4,760 for family coverage, the average HSA balance is only $1,180, which is less than half of the single coverage deductible.

First off, the study acknowledges that it does not include the presence of HRAs--another vehicle utilized by employers who have HDHP health-plans. This gap is very significant and makes the study almost irrelevant to the thrust of Z's argument---which is that HPHP policies are evil in themselves, and that employers are simply taking the savings and running.

The Labor proposal advanced by Newby (AFL-CIO) is quoted as:

The basic idea is that all workers and their dependents in Wisconsin would be covered by a common, totally comprehensive health care plan. It would be financed in a fair fashion by affordable co-pays and deductibles by workers, and a flat per worker per month fee by employers.

Exactly what are "affordable co-pays/deductibles?" Family health-care expenses (money paid out for care or insurance premiums) in the US have run in a range between 4% and 6% of family income.

If we take two Wisconsin mean-wage earners (see below) and calculate 4% to 6%, we get $2,800. to $4,200. in co-pay/deductible liabilities as the norm based on history. Is Z. suggesting that LESS than the national norms is better?

Finally, although not mentioned in Z's thread, it is a truism that preventive care is far more efficacious than non-preventive care. It saves money in the long run.

But will Newby, Z., and the Doylies force Wisconsin citizens to obtain preventive care?

And our Governor, to his eternal discredit, refuses to tax-preference HSAs in Wisconsin, even though the IRS does so.

It's no wonder that HSAs are not all that popular.


m.z. forrest said...

Having an HRA, I can tell you that they are one the worst creations on earth. They are just another form of cost shifting. I'm still sorting out several thousand in bills and my son was born 6 months ago. It is a cruel joke.

As far as the % figures, they tell an aggregate story, but they don't account for the specific. A man making $30,000/yr supporting a family of 4 with a $5K deductible and a $3.5K HRA has 5% of his income going to covering deductibles alone and 16% of his income cash flowing the HRA and his own deductible. That's 2 months of income before taxes/housing and everything else. Add another 10% of the man's income for family premiums and you are talking about a whole fist full of dollars.

You know what the median wage is in this state. And you know the median household income. It is a plan 50% of the State can't afford.

Dad29 said...

MZ, you can't accuse me of having "specifics" and then use your OWN "specifics."

$30K x 4% is $1200.00--which is the national norm. In other words, about two weeks' gross income.

I do not object to 'capping' medical expenses at 4%, or 5%, or 6% of family gross income. But that's not the point of the post.

The point of the post is to get some definitions of the terms, and to start the discussion with those firmly in hand.

m.z. forrest said...

I wasn't criticizing you per se. More grumbling than anything else. The deductible I chose was my own. I don't think the stats tell the whole story, b/c medical costs are not normally distributed by income. As this relates to affordibility is where we have the problem. For example, my premium alone is 14% of gross at the start of the year. It was 10% of gross last year. If I exhaust my $1500 deductible, that will mean 18% of gross income spent on heath expense.

So, let's build it backwords and cap medical expense at 6% of income. In my case, we would be looking at an income of $100,000 to support the 6% affordability mark. Going the other way, say we wanted 80% affordability, e.g. 80% of the state's residents could afford it, my guess is the lowest income among the top 80% would be $18,000, +/-. 6% of that would be about $1,000. That is approximately my employer's and my combined monthly premium for family coverage.

I agree with you that it is important for people to understand what we are discussing.

Karen Marie Knapp said...

Unfortunately, HRAs and their kin presume that there is excess money after rent, after heat and electric and phone, after groceries and pharmacy, available to contribute. For large nimbers of us out here, that just isn't so.

Just for another data point: 63.7% of my monthly pension is deducted for my health insurance premium (single, secondary to Medicare). Only 2.9% is deducted for fed and state income taxes.

Dad29 said...

Not true.

HRAs are funded by employers only. No employee contributions are made.

HSAs are employer/employee funded (except for self-employed people, who obviously are both sides of it..)

Like a lot of Democrats, you are saying something that is almost meaningless in the context of the discussion on the thread. This debate should be held on statistically-valid grounds, not on what's rumored to be so.

I already indicated that perhaps it WILL be a good thing to cap one's medical expense at 6% of gross income--maybe only 5%, or 4%. That's a starting point.